Living in Dilemma: LNG in the Middle East

The Middle East still sits on the throne of oil. In 2013, oil production in the region was of 27,671.2 thousand barrels per day1, constituting 30.33% of global oil production, and the proven reserves of crude oil were still spiking high at 802.157 billion barrels2, 52.4% of the world’s reserves.

As the world seeks less dependence on oil and looks for attractive alternatives, the Middle East is well-positioned, with 40% of the world’s proven natural gas reserves — 2,823.230 trillion cubic feet in 20133.

Yet despite all its richness, the region has several challenges to overcome that threaten its exports capability.

Qatar is the world’s leading exporter of Liquefied Natural Gas. Qatar’s proved natural gas reserves are of 900 trillion cubic feet, which entitled this country to be the third-largest gas reserves. In 2005, Qatar exported 20.1 million metric tons of LNG to the global market. In 2009, the exports reached 36.7 million tons, and in 2012, the number became 77.4 million tons4. During one decade, Qatar has increased its LNG exports by 6 times5.

Considering its small population; 2.051 million in 20126, Qatar doesn’t face any issue in meeting its energy needs internally while keeping its exports high. Qatar’s real challenge is to keep itself atop the throne as the largest LNG exporter, with several emerging exporters coming on strong such as Australia and North America.

Another important contributor to the LNG global market is Abu Dhabi. This Arabic Emirate has the fifth rank globally in terms of gas reserves with 198.5 trillion cubic feet. Yet Abu Dhabi exports 93% of its LNG production to Japan7 through a long-term contract established between the two. Thus a barrier is created against local access of Abu Dhabi’s natural gas. With a growing population — increasing by one person every two minutes and 48 seconds8 —and an increasing demand caused by the rising energy intensive industries, this inability to use the natural gas domestically will require Abu Dhabi to dramatically increase its gas imports.

For Oman, exports of LNG in 2012 were of 8.1 MT (395 billion cubic feet). As for Yemen, LNG exports only started in 2009, and as of 2013, Yemen held 16.9 trillion cubic feet of proved natural gas reserves. In 2011, Yemen exported 6.4 MT (309 bcf) of LNG, consisting of over 90% of its total dry natural gas production that year. In 2013, Yemen LNG provided around 3% of global LNG volumes9.

Aside from these four exporters, most of the countries in the Middle East either use natural gas internally to meet their energy demand, or import LNG.

Although Iran holds the world's second-largest natural gas reserves with 1,187 trillion cubic feet, sanctions placed on the country by the United States of America and the European Union have deeply affected the investments and technology advancements in this field, resulting in its inability to implement LNG projects, despite aspirations to do so.

The remaining countries are currently struggling with increasing demand. Middle Eastern gas consumption is expected to grow about 5% annually10 due to several factors: the shift from oil to gas in the power sector, the growth of the industrial sector, the injection into oil reservoirs to enhance oil recovery, and the growth in population. This has led the International Energy Agency (IEA) to warn that an increase in gas exports from the region is unlikely to happen over the next few years.

In 2002, the natural gas consumption in the Middle East was of 7,662 bcf, rising to 14,826 bcf in 201211; the consumption has doubled in one decade. Besides that in 2002, the Middle Eastern natural gas consumption represented 8.4% of the world’s, while it climbed to 12.3% of the world’s consumption in 2012.

Several countries in Middle East have already realized the high benefits and cost-effectiveness of LNG, which provides the world with the lowest technical and non-technical transaction costs when compared to other hydrocarbon conventional energy resources12. As the ability to export decreases in the face of increasing demand, and as increasing imports become a necessity for the future energy of most of the Middle Eastern countries, it would seem cost-efficient to invest in a proper LNG infrastructure within the region. But that remains highly dependent on the stability and political reality of a region currently living in such turmoil.

In the most of the world LNG is indicated in metric tons and gas in billion cubic meter, bcm.

Russia's gas price to Europe was about $387/1000 cm in 2013, equivalent to $10.54/million Btu, based on 1040 Btu/cf.

Iran has the second largest gas reserves after Russia, It has almost no net exports. Its entire production is consumed domestically.

That may change when Russia will help Iran develop its LNG facilities so it can export to East Asia, as does Qatar to Japan. Iran does not need to own the ships to carry the LNG.

Russia and Iran are discussing a project to build 10 nuclear plants in Iran. This will greatly reduce the need for using gas for energy purposes, i.e., it will become available for export as LNG.

WORLD PROVEN GAS RESERVES

Ten nations are the major holders of the world’s proven gas reserves. The top five are:

Gas reserves...........Bcm.................Exports

Russia..............47,804.............212.40

Iran.................33,786................3.90

Qatar...............25,063.............125.00; as gas 19, as LNG 106

US....................9,459...............37.38; net imports

Saudi Arabia......8,241.................0.00

The numbers indicate Iran is a big “prize”. If it were more cooperative, it could more properly develop its gas resources. The numbers also indicate, the US, a big consumer of gas, is not in any position to export gas in meaningful quantities to Europe or East Asia for geo-political reasons, because the US needs its low-cost gas for its own economy. To pretend otherwise, using various geo-political reasons, such as “checking Russian expansionist land-grabbing”, is irrational, to say the least.

http://www.eia.gov/countries/cab.cfm?fips=RS

http://en.alalam.ir/news/1466052

EXISTING LNG EXPORTING COUNTRIES

Total LNG exports were 237.7 million metric ton in 2012. Much of the world’s LNG exports are from politically unstable countries. The top 5 LNG exporters in 2012 were:

It would be helpful if you could post the conversion ratio between 1 metric ton (LNG) and 1000 cubic meters (NG as a gas) and the conversion ratio between 1,000 cubic meters (gas) and 1,000 cubic ft (gas). In most of the world is natural gas sold to residential customers by the 1,000 cubic meters?

Hello Willem: Thank you for your response. I have now had the time to look at your Energy Collective article that you referred me to. I am only interested in standard energy units and standard energy conversion factors. Before reading your article, I was hoping that it concentrated on standard energy units and standard energy conversion factors with specific references, but it did not. I assume that in the EU and in other countries that use the standard cm for residential billing that the standard cm of natural gas as a gas is defined in terms of a standard amount of energy (j, Btu) in a standard cm at a standard temperature (C, F) and at a standard atmospheric pressure [atmosphere(atm), bar (b), kilogram per sq. cm (kgf/cm]. The standard units of measurement for the cm, j, Btu, C, F, atm, b, kgf having been previously standardized. Governments determine standard weights and measurements but can delegate their authority to scientific societies or trade associations. In the US, natural gas as a gas is measured and sold to households by the therm (mBtu). The gas meter at my home is a volumetric (cf) meter. The actual volumetric value each month is adjusted for the actual temperature and atmospheric pressure and converted into therms in order to bill me. All the measurements and billing are done in accordance to tariffs and regulations approved by the state Public Utility Commission. The US EIA states* that there are 1034 Btu/cf and converts this to 0.028317 Btu/cm. This is based on a volumetric conversion of cf into cm and not a conversion of the US standard unit of NG measurement (Btu/cf) into the EU standard NG unit of measurement (mj/cm). Unless we first convert Btu/cf into mj/cf and then into mj/cm and confirm that the US natural gas unit is equal to the EU natural gas unit, we cannot be sure that certain that based on volumetric conversion, these standard units are equal. Let us not forget that “different unit standards make successful communication tricky, and can sometimes lead to hilarious and/or dangerous errors.**

The statement about Iran is interesting. If U.S. sanctions have kept Iran from developing an LNG export infrastructure, then I think it's likely that Russia and China will be stepping up to the plate with assistance.

With its sanctions on Russia and its new cold war rhetoric, the U.S. is driving an economic and military alliance among Russia, Iran, and China. That strikes me as an exceedingly bad idea, but what do I know? Perhaps it makes sense to those whose fortunes are tied to the existence of enemies to fight. There's been talk of cutting the defense budget; can't have that, can we?

BTW, you stated that in 2011 Yemen exported 6.4 MT (a unit of mass) or 309 bcf (a unit of gas volume) of natural gas. Using the US conversion factor of 1,025 Btu/cf and a market value of $12/mmBtu, in 2011, Yemen received about $3.8 billion in natural gas revenue.

Interesting data, but your data is confusing. I think that this is because the standard units of measurement in the natural gas industry are confusing. A metric ton is a standard SI unit of measurement for mass (weight) while bcf is a standard (in US called the English system) unit of measurement for volume. Natural gas is a gas. Gases and liquids are usually measured by volume (i.e., a liter of gasoline). You list the proven gas reserves in bcf. A cubic foot is a unit of volume. Natural gas can be measured by volume or by energy content. What counts in a volume of natural gas (bcf) is its energy content. In the US natural gas is sold by its energy content, the mmBtu or by the therm. There is in the US, a standard conversion factor between the volume and energy of natural gas. Do you know the unit of measurement for the retail sale of natural gas in the Middle East or in the EU (€/mj)? LNG is a liquid not a solid, yet you quote the sales of LNG in metric tons, not in bcf and not in mmBtu or megajoules.

Several Middle Eastern countries are discovering that they can improve their trade balances while satisfying domestic electricity demand by starting nuclear programs.

According to the WNA, the United Arab Emirates began construction in 2012 on its first nuclear plant at Barakah, which is planned to total four reactors providing a combined 5.6 GWatts of electrical output. It is quite a big investment given the UAE's 10 GWatt average demand, but will be easy to integrate on the regional grid (shared with 5 other nations) which has a peak generation of 80 GWatts.

Saudi Arabia has started setting up a regulatory infrastructure for nuclear power, with the hopes of starting construction of it first nuclear plant in 2016 and providing 20% of the country's electricity in 20 years.

Iran's first commercial reactor is apparently now operational at Bushehr, a 915 MWatt Russian built design. They have announced the intention of adding more reactors.